Hi Guys,
I have a question pertaining to foreign tax credits and how they're used to offset foreign income or even passive income.
From last year's taxes, I see that in my current year taxes, some a few Ks worth of foreign tax creds from Canada were not used and simply carried over to next year.
This doesn't make sense, as I had Canadian income and I was hoping that instead of the carry over, that the tax credits could be applied to my CDN income and thus getting a refund.
Am I missing how the CPA would be carrying them forward instead of applying them?
Last year I receive a few K back in refunds, this year, I am getting virtually nothing back and to top it off, I have to pay future predicted tax on a quarterly basis.
Thoughts?
Foreign Tax Credits
Moderator: Mark T Serbinski CA CPA
The FTC at most credits the US tax you paid on that Cdn income. It is done on an average basis, while the income is added to the top of the heap -- your marginal rate.
That is what, even if you paid a higher rate of tax in Canada, yo uwill have lots of carryforward.
Now, carryfoward is only used AFTER the current years foreign tax is used up. Unless your situation changed drastically, you continue to build carryfrorward every year until it expires.
If, in a particular year you have foreign income, but little or no Cdn tax, then you can start using up some carried forward ftc.
It has to be in the same category. Your carry forwards are by category.
Never look at your refund. Look at the tax calculated. A large refund simply means you had too much withheld.
You want to give an example?
That is what, even if you paid a higher rate of tax in Canada, yo uwill have lots of carryforward.
Now, carryfoward is only used AFTER the current years foreign tax is used up. Unless your situation changed drastically, you continue to build carryfrorward every year until it expires.
If, in a particular year you have foreign income, but little or no Cdn tax, then you can start using up some carried forward ftc.
It has to be in the same category. Your carry forwards are by category.
Never look at your refund. Look at the tax calculated. A large refund simply means you had too much withheld.
You want to give an example?
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best